Wk11: Market Recap

In last week’s news, Warren Buffett’s commented Monday that the economy has “fallen off a cliff,” but is optimistic that the banking sector will recover. Citigroup announced they we’re profiting on the year Tuesday and stocks soared with the DOW up 5.8%, S/P 6.4% and NASDAQ and Russell up over 7%. Citigroup itself ended up 34% on the day. Gold pulled back early in the week before climbing higher with a close of 928.00 on Friday (London Fix PM).

As the week progressed more good news rolled in, well investors liked the news anyways. Bernard Madoff was jailed on Thursday after pleading guilty in the largest investment fraud in Wall Street history, drawing in $65 billion over his 20 years scandal.

Last week’s rally looks small on the longer term chart. With a strong S/P previous support at 800, it seems likely that we would turn lower before breaching this point. That 800 level also happens to be where the 50-Day MA is currently sitting, for those of you who use Moving Averages. The indices broke their down trend line and closed above their 10 and 20-Day Moving averages and are sitting just below the 30-Day MA.

The VIX broke its current trend line to the downside last week. Whenever a trend is broken it is usually retested. That once support, will then act as resistance when retested.
For those of you that are bullish, a buy signal printed on the NYSE Bullish Percent Index on March 12. The BPI is applied to a group of stocks as compared to another and charted using Point and Figure Charts. Since we received this signal in an oversold state, it does give higher probability of success to bullish positions taken at these levels. While the chart may not make much sense, it is based off the simple rules of supply and demand.

Wk12: Market Forecast

In the week ahead make note of these important economic announcements.
· Sun: Ben Bernanke Speaks on CBS 60 Minutes 7:00 PM ET
· Mon: Industrial Production 9:15 AM ET
· Tues: Housing Starts 8:30 AM ET
· Tues: Producer Price Index 8:30 AM ET
· Weds: Consumer Price Index 8:30 AM ET
· Weds: FOMC Meeting Announcement PM 2:15 ET
· Fri: Ben Bernanke Speaks 12:00 PM ET

Other economic news reports are Housing Market Index Monday, Petroleum Status Report Tuesday and Jobless Claims Thursday. Visit the Economic Calendar on the Links Tab for a more in-depth look at economic data.

Using a Fibonacci Retracement from the previous swing high we’re sitting right between the 38.2 and 50 retracement levels. Fibonacci Retracement’s are quite subjective on the level at which the study is drawn, therefore we will use these numbers as a loose range of support and resistance with the 38.2, 50, and 61.8 holding the most weight.

It would be expected to see profit taking in the week or two ahead so a move to the S/P 800 level may be a stretch. If we do begin to sell off one of two things are likely to happen. We see a move lower that does not break the previous low, at which point we put in a slightly higher low. Or, we break the all mighty 666 level where a move down to the 650 area on the S/P would be likely before the bears have had enough and the bulls step back in.

Watch out for news this week, there’s a lot of it so stay on your toes and have your risk managed.

Wk12: Stocks to Watch

LONG

ARO - Sitting right at the 200-MA and showing increasing volume on the current rally. Enter close to $24 with a stop under the prior swing low.

BR - Broke out nicely on good volume. Buy on a pullback at prior resistance around $16.50-$17.00.

HANS and SA are acting similar to BR. Use BR’s chart as a reference when drawing your support and resistance trend lines.

GEOY - Buy on a break of $20.30 (Resistance). The trade can be easily managed with a stop below $18.60.

SVR - Emerging breakout. A move over $15.80 on good volume should send the stock higher.

XLNX - Another emerging breakout that can be played one of two ways. You can try and catch this breakout move if the stop opens even on Monday, or wait for a pullback to prior resistance of the $19 area.

SHORT

ADBE - If we begin to roll over look for ADBE to fall hard as it approached its down trend line and is showing weakness.

BBT - If BBT breaks below the tail of Friday’s candle then we like this one to the short side. A stop can be placed over the high of Friday’s candle.

CALM - Great inverted hammer on this stock. Typically we’d enter on a break of the low of that candle with a stop over the high. Watch to see if the stock is active relatively weak or strong to the S/P before placing your trade.

ESV - Similar to CALM, we also like the decreasing volume on the rally

CBU and DBD have rallied to their prior support levels making for a great entry to the short side as well.

Wk10: Market Recap

Week 10 was filled with economic data. The ISM manufacturing report showed a second straight month of strength which is leading some to say that the worst may be over. In President Obama’s statement Tuesday, he expressed that the long-term valuation of the stock market is attractive.

Tuesday a very weak pending home sales report headlined the day's economic data. The report points to deepening declines for current home sales. The Fed’s Beige Book reported that the recession is deepening, and a series of comments from Federal Reserve officials seemed to confirm that accusation.

February's atrocious jobs report was expected. The markets expected the unemployment rate to move to 9 percent sometime about mid-year.

Wk11: Market Forecast

In the week ahead make note of these important economic announcements.
· Tues: Ben Bernanke Speaks 8:30 ET
· Thurs: Retail Sales 8:30 ET
· Fri: International Trade 8:30 ET
Look for a break of S/P 725 or 665 for continued moves to the up or downside. We are in uncharted territory so proceed with caution. The most important thing through these times is to preserve capital.

Wk11: Stocks to Watch

For this week’s watch list, look to our Facebook group where Justin will be keeping everyone up to date on weekly market action…
http://www.facebook.com/profile.php?id=10029906&ref=profile#/group.php?gid=57750268853

Feb09 Recap

The S/P and Dow both broke down and closed below the prior lows set back in 2002, while the NASDAQ and Russell are considerably well off those levels. Nonetheless, the month of February was quite bearish. Earnings, Economic Data, and President Obama’s Stimulus Plan were all contributing factors in the month’s volatility.
Even though we are primarily swing traders, it is important to back out and review the indices and individual positions on a larger timeframe as prior levels of support and resistance can come into play matter how far out they may be.

Wk9: Market Recap

The internals do not paint a clear picture of last weeks price swings (Click on the image to read more about the A/D Line and Breadth). With a fake out to the upside mid-week, the bears finished the week on top. Economic news was grim as news of the federal government taking over Citigroup along with a weaker than expected fourth quarter GDP of -6.2% on Friday sent stocks lower.
As we continue making these new lows, the VIX (Volatility Index) is remaining steady with no major price swings. It seems that investors are not in all out panic mode day-to-day and rather accepted the markets slow grind lower.

While we haven’t seen a strong rally OR panic sell that we have been discussing, one of the two on its way here in the week or weeks to come.
As we wrote about on February 18th, we are in an area with very little support, looking back 12 years to even find a point where the SPX was at these levels. Straight lines (moves higher without consolidation) don’t make for good support levels so we may not see a significant support level until the S/P 650 area.

Wk10: Market Forecast

In the week ahead make note of these important economic announcements.
· Mon: Personal Income and Outlays 8:30 ET
· Mon: ISM Manufacturing Index 8:30 ET
· Fri: Employment Situation 8:30 ET

Also pay attention to Tuesday’s Pending Home Sales Index at 10:00 ET and Thursdays Jobless Claims 8:30 ET.

A move lower seems likely, but we are still setting up with some long positions because we feel the risk/reward is such that a sharp rally to the upside will occur at the most unexpected time. The next level of support is not clear cut so be prepared for a strong move in either direction. Keep an eye on the VIX for confirmation of the move (a move down with a spike in the VIX or a move up with a retraction).

Wk10: Stocks to Watch

Last weeks trading session didn’t produce much. As mentioned in a previous write up called “First 15-min. Rule” we do nothing the first 15 minutes the market is open. This gives us an initial gauge of market direction. Typically if a stock gaps up or down off the open it fills, therefore if a stock we are thinking about going long gaps up above our entry price, it will either begin to fail in the first 15 minutes, or move higher. Waiting for this confirmation helps shake out false moves and keeps us from entering many potential losers.

We like the recent pullback in gold and use GLD to play the metal.

Long Setups: ACS, AU, CSTR, FCX, ORLY

Short Setups: BBT, CBU, ESV, FLIR, GMT, SON, VMC